Limit on Contributions

While many taxpayers do not contribute the maximum amount allowed to their HSA, you may need to explain these limits to taxpayers. The amount that can be contributed to an HSA depends on the:

• Type of HDHP coverage (self-only or family coverage)
• Taxpayer's age
• Date the taxpayer became an eligible individual, and
• Date the taxpayer ceases to become an eligible individual.

If the taxpayer is an eligible individual on the first day of every month with the same coverage for the entire year, the full contribution amount is allowed.

Taxpayers with excess contributions (contributions over the limits) must withdraw the excess to avoid an additional 6% tax. If the excess is not timely withdrawn, refer the taxpayer to a professional tax preparer. Review Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, Form 8889, Health Savings Accounts (HSAs) Instructions, and Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans, for details.